Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 26,it paid the full amount due.The correct journal entry to record the merchandise return on August 11 is:
A)Debit Accounts Payable $1,500; credit Cash $1,500.
B)Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500.
C)Debit Merchandise Inventory $1,500; credit Sales Returns $1,500.
D)Debit Merchandise Inventory $1,500; credit Cash $1,500.
E)Debit Accounts Payable $1,500; credit Purchase Returns $1,500.

Question

Quizplus · Accepted Answer

When merchandise is returned, the Accounts Payable account needs to be credited for the amount returned. Additionally, because the company uses the gross method of accounting for purchases, the Merchandise Inventory account needs to be debited to reflect the decrease in inventory. Therefore, the correct journal entry is to debit Merchandise Inventory for $1,500 and credit Accounts Payable for $1,500.

Juniper Company Uses a Perpetual Inventory System and the Gross